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Forex New York Euro Summary--The Fed's Afternoon Appearance

Posted by Joseph Trevisani on Jul 25, 2013 4:08:00 PM

Euro-dollar began the American session at 1.3213 (8:00 am) about the middle of its European range having traded to 1.3231 on slightly better German Ifo data (business climate 106.2 vs. 106.1, current assessment 110.1 vs. 109.7, expectations 102.4 vs. 102.5), down to 1.3167 and then in a tight 1.3200-20 range ahead of U.S. durable goods and initial jobless claims at 8:30 am.

At the release the euro dipped quickly to 1.3192 as the overall orders were much stronger at 4.2% for June than the 1.4% predicted. However the ex-transport number was flat, much weaker than the 0.5% forecast. Civilian aircraft orders were up 12.8% on the month and Boeing's order book jumped 24% to 282 planes. Within two minutes the euro had reversed to 1.3212 and by 8:46 it was at 1.3239.

At about 9:30 am the euro dropped to 1.3210 after an IMF report suggesting that the ECB should cut rates given that they expected the EMU economy to contract 0.6% in 2013.

Despite that opinion and rising US Treasury yields, at 11:23 am the 10-year yield had gained four basis points to 2.63%, on top of yesterday's nine point rise, the euro gradually gained 30 points touching 1.3240 at 11.36 am before drifting off to 1.3222 by the London close at noon. A brief sharp move through 1.3240 reached 1.3256 but the pair again settled down to consolidate at 1.3245.

Just after 3:00 pm a Wall Street Journal story by John Hilsenrath, regarded by the market as a reliable outlet for the Fed, stated that at the next FOMC meeting on July 30-31 the bank would revise the bank's "forward guidance" on rates and keep its $85 billion a month bond purchase program in place.

The article discussed various possibilities for indicating a yet longer period for low rates. Although Chairman Bernanke has already said rates would be low for the foreseeable future and no move on the bond quantitative easing purchases is expected until September at the earliest, buying interest immediately kicked in, stops above 1.3260 were triggered and the euro climbed to 1.3294 before slipping back to 1.3277 by the close.


Chart: Bloomberg

ScreenHunter 1503 Jul. 25 17.23


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